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DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
 12 Months Ended
Dec. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING
 
We are exposed to interest rate risk through our variable-rate debt. We manage this risk primarily by managing the amount, sources, and duration of our debt funding and through the use of derivative financial instruments. Specifically, we enter into derivative financial instruments to manage our exposure to known or expected cash payments related to our variable-rate debt. The maximum length of time over which we have hedged our exposure to variable interest rates with our existing derivative financial instruments is approximately six years.
 
Our objectives in using derivative financial instruments are to add stability to interest expense and to manage our exposure to interest rate movements. To accomplish these objectives, we primarily use interest rate swaps as part of our interest rate risk management strategy. Our interest rate swap is designated as a cash flow hedge and involves the receipt of variable-rate payments from a counterparty in exchange for making fixed-rate payments over the life of the agreement without exchange of the underlying notional amount.
 
Our agreement with our derivative counterparty contains a provision where if we default, or are capable of being declared in default, on any of our indebtedness, then we could also be declared in default on our derivative financial instrument.
 
Information about our derivative financial instrument at December 31, 2016 and 2015 is as follows (dollar amounts in thousands):
 
 
 
December 31, 2016
 
December 31, 2015
 
 
Number of
Instruments
 
Notional
Amount
 
Fair Value
 
Number of
Instruments
 
Notional
Amount
 
Fair Value
Interest rate swaps (liability)
 
1

 
$
75,000

 
$
(1,118
)
 
1

 
$
75,000

 
$
(1,811
)
 
 
1

 
$
75,000

 
$
(1,118
)
 
1

 
$
75,000

 
$
(1,811
)

 
Our interest rate swap has been designated as a cash flow hedge and is valued using a market approach, which is a Level 2 valuation technique. At December 31, 2016 and 2015, our interest rate swap was in a liability position. The interest rate swap expires on October 1, 2018. We are not required to post any collateral related to this agreement and are not in breach of any financial provisions of the agreement.
 
The table below details the location in the financial statements of the gain or loss recognized on derivative financial instruments designated as cash flow hedges (in thousands):
 
 
 
2016
 
2015
 
2014
Loss recognized in accumulated other comprehensive income on derivative financial instruments (effective portion)
 
$
(497
)
 
$
(1,846
)
 
$
(2,112
)
Loss reclassified from accumulated other comprehensive income to interest expense (effective portion)
 
$
(1,190
)
 
$
(1,927
)
 
$
(1,741
)
Loss recognized in Other Expense (ineffective portion)
 
$
—

 
$
(1
)
 
$
(1
)

 
Amounts reported in accumulated other comprehensive income related to derivative financial instruments will be reclassified to interest expense as interest payments are made on the hedged variable-rate debt. In 2017, we estimate that an additional $0.8 million will be reclassified from other comprehensive income as an increase to interest expense.